Private Lending in Australia: How It Works, Rates, LVRs & When It Makes Sense

Private lending in Australia has become one of the most practical alternatives to bank finance for borrowers who need speed, flexibility, or a structure that banks won’t approve. It’s commonly used by property investors, developers, and business owners who have strong assets and a clear plan but don’t fit traditional bank criteria or timelines. If you’re researching private lending, this guide explains:

• What private lending is (and what it isn’t)

• How private lenders assess deals

• Typical loan structures, LVRs and timeframes

• Common use cases (bridging, second mortgages, development)

• Risks to understand before proceeding

For a broader overview of our solutions, start with our main private lending in Australia page.

What Is Private Lending?

Private lending is a form of non-bank finance where funds are provided by a private lender or credit fund, typically secured against real property. Unlike banks, private lenders generally focus on:

• Asset strength (property value and marketability)

• Loan-to-value ratio (LVR)

• Exit strategy (sale, refinance, stabilisation)

• Time sensitivity and transaction complexity

Private lending is most commonly used for business-purpose or investment-purpose borrowing, rather than everyday consumer finance. If you’re comparing options, this guide on non-bank lenders in Australia explains how private lenders differ from banks and other non-bank providers.

How Private Lending Works in Australia

A typical private lending process looks like this:

1. Scenario & security reviewProperty location, type, current debt position, and funding purpose.

2. Indicative termsMany private lenders can issue terms quickly once they understand the asset and exit.

3. Due diligenceUsually involves valuation (or assessment), searches, and legal review.

4. Loan documentation & settlementSettlement timing depends on responsiveness, valuation turnaround, and legal process.

Private lending is often chosen because it can move faster than banks when a deal has a deadline for example auctions, short settlements, or funding a time-sensitive opportunity.

What Types of Private Loans Are Common?

First Mortgage Private Lending

A first mortgage is the primary security position. These loans are often used for purchases or refinances where speed is essential.

Learn more about first mortgage private lending.

Second Mortgage & Equity Release

A second mortgage sits behind an existing lender and can be used to unlock equity without refinancing the first loan. This is common where a bank won’t increase lending but equity exists.

Learn more about second mortgage finance.

Bridging Finance

Bridging loans are designed to bridge a timing gap — such as buying before selling, or awaiting refinance while securing an acquisition.

Learn more about bridging loans.

Development & Subdivision Funding

Private lending can fund from early-stage (DA) through to construction, especially where banks require pre-sales or strict conditions.

Learn more about development loans and construction loans.

Secured Business Loans

Businesses often use property-secured funding to access capital for operations, acquisitions, or restructuring.

Learn more about secured business loans and short-term business loans.

Typical LVRs, Rates & Timeframes

Every private loan is priced to risk and structure, but the general framework looks like this:

• First mortgages: commonly up to ~65% LVR (sometimes higher on strong assets)

• Second mortgages: combined LVR may reach ~75% on quality assets (case-by-case)

• Timeframes: indicative terms can often be issued quickly; settlements depend on valuation, legal and diligence timelines

• Rates: vary based on LVR, asset type, term, and exit strategy

Private lending isn’t “cheap money” it’s execution money. It’s used when speed, flexibility, and certainty matter more than the lowest possible rate.

When Private Lending Makes Sense

Private lending is commonly used when:

• You need to move quickly (auction, short settlement, off-market)

• Banks are slow or have declined due to policy

• The security asset is strong but the structure is complex

• You’re bridging between sale and refinance

• You need equity release behind existing debt

• You have a clear exit strategy within months, not years

What Private Lenders Look For

Private lenders generally want clarity on:

• The security asset: location, saleability, condition, zoning

• Current debt position: first mortgage, second mortgage, other encumbrances

• Purpose of funds: business/investment use

• Exit strategy: sale, refinance, refinance post-construction, etc.

• Timing: settlement date, urgency, key milestones

A strong deal is usually one where the asset is good, the LVR is sensible, and the exit is clear.

Risks & Considerations

Private lending is powerful, but you should understand:

• Loan terms are often short — you need a realistic exit plan

• Costs include legal and valuation expenses

• Higher LVRs can increase risk and pricing

• Poor exits (or delays) create refinancing pressure

If you’re unsure about structure, it’s better to clarify early than to rush into a facility that doesn’t match your timeline.

Frequently Asked Questions

Is private lending legal in Australia?

Yes. Private lending is legal in Australia when structured correctly. Business-purpose and investment-purpose lending is commonly structured in a way that differs from consumer credit.

How fast can private lending be approved?

Indicative terms can often be issued quickly once security and scenario details are provided. Settlement timing depends on valuation, legal process and due diligence.

Can private lending be used for tax debt or business cash flow?

In many cases, yes provided the facility is structured appropriately and secured against a suitable asset. (This is often handled through secured business lending.)

Can I get a second mortgage if my bank says no?

Often, yes that’s one of the common use cases for second mortgage lending.

Final Thoughts: Private Lending as a Strategic Tool

Private lending in Australia is best viewed as a strategic financing tool — designed to help borrowers execute time-sensitive transactions, handle complex scenarios, and bridge temporary gaps until long-term funding becomes available.

If you want to understand which private lending structure fits your scenario, start with our main guide to private lending in Australia, or explore specific options like bridging finance and second mortgages.